Pricing Efficiency and Arbitrage in the Bitcoin Spot and Futures Markets

Seungho Lee, Lorne Switzer*, Nabil El Meslmani

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This study examines the pricing efficiency for the leading cryptocurrency, Bitcoin using spot prices and all CBOE and CME futures contracts traded from January 2018 to March 2019. We find that the futures basis provide some predictive power for future changes in the spot price and in the risk premium. However, the basis of Bitcoin is a biased predictor of the future spot price changes. Cointegration tests also demonstrate that futures prices are biased predictors of spot prices. Deviations from no-arbitrage between spot and futures markets are persistent and widen significantly with Bitcoin thefts (hacks, frauds) as well as alternative cryptocurrency issuances.
Original languageEnglish
Article number101200
JournalResearch in International Business and Finance
Volume53
Early online date20 Feb 2020
DOIs
Publication statusE-pub ahead of print - 20 Feb 2020
EventInternational Conference on Digital, Innovation, Entrepreneurship & Financing - UPV, Campus de Vera, Valencia, Spain
Duration: 2 Dec 20193 Dec 2019
https://dif2019.sciencesconf.org/

Keywords

  • Bitcoin
  • cryptocurrency
  • speculation
  • efficient markets
  • futures arbitrage
  • PRICES
  • INEFFICIENCY
  • BEHAVIOR
  • PREMIUMS
  • STOCK INDEX FUTURES
  • HEDGING EFFECTIVENESS
  • DISCOVERY
  • COINTEGRATION
  • VOLATILITY

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